China to receive Russian oil supplies via Kazakhstan

Russia News.Net
Monday 11th November, 2013

MOSCOW – Russia’s state-owned oil company Rosneft has agreed in principle to supply oil to China via neighboring Kazakhstan in a deal essential to honor its supply commitments to Beijing.

The preliminary agreement for transportation of oil through Kazakhstan was signed Monday by executives of Rosneft, Kazakh state oil firm KazMunaiGas and oil pipeline monopoly in the presence of President Vladimir Putin and Kazakhstani President Nursultan Nazarbayev.

No details were disclosed, but sources familiar with the agreement said the supply volumes may reach up to seven million tonnes a year (140,000 barrels of oil per day) to China via Kazakhstan using the Atasu-Alashankou pipeline that links Kazakhstan and China.

The world’s largest listed oil company by output, Rosneft is targeting to triple oil exports to China to some 1 million barrels per day (bpd), seeking to secure a bigger market share and billions of dollars in pre-payments.

China is interested in using this route as its China National Petroleum Corporation (CNPC) owns 50 percent of the Atasu-Alashankou pipeline, which is not yet operating at its full capacity.

The cross-border crude oil pipeline between China and Kazakhstan transported a record high monthly volume of 1.23 million mt of crude in October, state-owned CNPC said Monday. The shipments increased 26.8% from September, according to a report on the company’s website.

The pipeline started operating in July 2006 and has since sent a cumulative total of 61 million mt of crude to China, CNPC said.

“Kazakhstan is an additional route, not a substituting one [for the Eastern Siberia – Pacific Ocean (ESPO) pipeline],”Deputy Prime Minister Arkady Dvorkovich said earlier.

“The idea is to keep the ESPO pipeline filled to capacity and make additional supplies through Kazakhstan.”

Kazakhstan is prepared to offer a quota for the transit of Russian oil to China in the region of 3-4 million tonnes a year.

Rosneft’s transit though Kazakhstan is expected to be linked to the construction of a refinery in Tianjin region in China. It is expected to process 13 million tonnes of oil a year, of which about 9 million tonnes will come from Russia.

Under the terms of the agreement, Rosneft would pay export duty of $395.90 per metric ton in November to the Russian state, Reuters reported citing sources.

Russia and Kazakhstan are part of a Moscow-led duty-free customs union, and the issue of how export duty would be levied was one key obstacle to the agreement.

In turn, KazTransOil would cut transportation tariffs for Rosneft, which is targeting to start oil supply from next year .

The sources said Rosneft and Kazakhstan plan to clinch a final deal by the year-end.

Rosneft President Igor Sechin also held working meetings with Kazakh leaders and KazMunayGaz senior officials to discuss cooperation between Rosneft and their country in the energy sector, specifically in the field of mutual oil supplies and joint work in the exploration and production of hydrocarbons in Kazakhstan.

Kazakhstan is prepared to offer a quota for the transit of Russian oil to China in the amount of 3-4 million tonnes a year.

Kazakhstan has meanwhile lifted the ban on import of gasoline from Russia, Tengrinews reported citing the press-service of Ministry of Oil and Gas of Kazakhstan. The ban on import of Russia-made petroleum products was introduced in May 2013.

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